Credit rating of Illinois town cut after mayor indicted

CHICAGO Dec 20 (Reuters) - Standard & Poor's Ratings
Services downgraded the rating of Bridgeport, Illinois on
Thursday after the mayor was recently indicted for diverting
city money for his own use.

S&P cut the rating of Bridgeport, a southeastern Illinois
town with a population of about 1,800, to BBB-plus from A.

The town is strapped for cash because it has a struggling
manufacturing sector, low-income levels and a high debt as a
percent of market value, according to the credit ratings agency.

A federal probe that led to the indictment of Mayor Max R.
Schauf in November has held up the release of the town's fiscal
2011 and 2012 audits.

Schauf was charged with three counts of mail fraud and one
count of obstruction of justice for allegedly submitting false
and fraudulent invoices, contracts and bills for services and
equipment to the city and pocketing a portion of the money, a
statement from the U.S. Attorney's Office for the Southern
District of Illinois said.

"The downgrade reflects the city's extremely low cash
reserves on a nominal basis and large fluctuations in general
fund operations in recent years," S&P analyst Kathryn Clayton
said in a statement.

Schauf, who has a trial date in February, pleaded not guilty
to the charges on Nov. 8, according to Jim Porter, a first
assistant U.S. attorney.

S&P said it could cut Bridgeport's rating again if the
audits indicate a deterioration in the town's general fund
operations and cash balances.

"City management has conveyed to Standard & Poor's that it
does not believe there will be any material effect (as a result
of the federal probe) on the financial statements," S&P said.

The town, which has an annual budget of around $275,000, has
about $3 million of outstanding debt, according to Clayton.

Earlier this year, the comptroller of another Illinois town,
Dixon, was charged with stealing more than $53 million from that
city since 1990. Rita A. Crundwell subsequently pleaded guilty
in November, according to the U.S. Attorney for the Northern
District of Illinois.